Arizona Real Estate License Real Estate Financing Concepts Questions and Answers Flashcards

What does the term 'loan-to-value ratio' (LTV) represent in real estate financing?

Answer: The loan amount divided by the appraised property value

The loan-to-value ratio is calculated by dividing the mortgage loan amount by the appraised value of the property.

In Arizona, a trustee's sale under a deed of trust is an example of which type of foreclosure?

Answer: Non-judicial foreclosure

A trustee's sale conducted under a deed of trust in Arizona is a non-judicial foreclosure that does not require court involvement.

Which type of loan features a fixed interest rate for an initial period that then adjusts periodically based on a market index?

Answer: Hybrid adjustable-rate mortgage

A hybrid ARM offers a fixed rate for an initial period (commonly 3, 5, or 7 years) before converting to an adjustable rate tied to a market index.

Under Arizona's anti-deficiency statutes, when is a lender generally prohibited from pursuing a deficiency judgment?

Answer: After a trustee's sale on a residential property of 2.5 acres or less

Arizona's anti-deficiency statutes generally prohibit lenders from seeking a deficiency judgment after a trustee's sale on qualifying residential properties of 2.5 acres or less.

What is the purpose of private mortgage insurance (PMI) in a conventional loan?

Answer: To protect the lender if the borrower defaults when LTV exceeds 80%

PMI protects the lender against loss if the borrower defaults on a conventional loan where the down payment is less than 20%.

Which document serves as the borrower's personal promise to repay the mortgage debt?

Answer: Promissory note

The promissory note is the borrower's written promise to repay the loan according to the specified terms.